Is Autolus Therapeutics (NASDAQ:AUTL) Using Debt Sensibly?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Autolus Therapeutics plc (NASDAQ:AUTL) does use debt in its business. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for Autolus Therapeutics

What Is Autolus Therapeutics's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2024 Autolus Therapeutics had debt of US$238.7m, up from US$135.8m in one year. But it also has US$705.9m in cash to offset that, meaning it has US$467.3m net cash.

A Look At Autolus Therapeutics' Liabilities

The latest balance sheet data shows that Autolus Therapeutics had liabilities of US$40.9m due within a year, and liabilities of US$284.9m falling due after that. Offsetting this, it had US$705.9m in cash and US$38.0m in receivables that were due within 12 months. So it actually has US$418.2m more liquid assets than total liabilities.

This surplus strongly suggests that Autolus Therapeutics has a rock-solid balance sheet (and the debt is of no concern whatsoever). On this view, lenders should feel as safe as the beloved of a black-belt karate master. Succinctly put, Autolus Therapeutics boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Autolus Therapeutics can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

In the last year Autolus Therapeutics wasn't profitable at an EBIT level, but managed to grow its revenue by 40%, to US$10m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Autolus Therapeutics?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Autolus Therapeutics lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through US$161m of cash and made a loss of US$234m. But the saving grace is the US$467.3m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Autolus Therapeutics's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. Pre-profit companies are often risky, but they can also offer great rewards. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Autolus Therapeutics is showing 2 warning signs in our investment analysis , and 1 of those is concerning...

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.